Mutual obligation

Labour & European Law ReviewWeekly Issue 29301 November 2012

For a contract of employment to exist, there has to be some mutuality of obligation between the parties - in other words, the employer has to offer work and the employee has to accept it. In Knight v Fairway & Kenwood Car Service Ltd, the Employment Appeal Tribunal (EAT) held that as there was no obligation on a minicab driver to work, there could not be any mutuality between him and the car company.

Basic facts

Mr Knight started working as a minicab driver with Fairway & Kenwood Car Service Ltd in June 2009. The written agreement between them stated that he was self-employed and responsible for paying his own tax and national insurance.

He was also responsible for providing all his own equipment, apart from the data equipment which allowed him to communicate with the company’s controller and which the car company installed in his car.

The agreement also said that, provided he made weekly rental (or circuit fee) payments to the company and told them if he was not going to work due to holiday or sickness, he could work as and when he wanted.

After a dispute, Mr Knight left the company in April 2010 and brought a claim for wrongful dismissal (effectively a breach of contract) which meant he had to show that he had a contract of employment with the company.

Tribunal decision

The tribunal said that there were two questions that needed to be asked:

was Mr Knight legally obliged to work on a certain number of days per week, for a certain number of hours?

was the employer legally obliged to provide a number of days and hours of work?

It said that, as there was no mutuality of obligation between the parties (Mr Knight was free to work whatever hours and days that he wanted), the agreement between them was not a contract of employment. He was not therefore an employee and could not bring a claim for wrongful dismissal.

EAT decision

The EAT said that as long as Mr Knight was signed on for work, it was “very likely” that he was an employee, either from the beginning to the end of the specific shift or at the very least from the beginning to the end of the individual job. However, although the overall relationship between the parties was governed by an overarching or umbrella contract, it held that it was not a contract of employment.

The question to ask (as opposed to the questions posed by the tribunal) was whether there was an obligation on Mr Knight to accept some minimum or reasonable amount of work? As there was no obligation on him to work at all, there was no mutuality of obligation. Nor was there scope for inferring such an obligation from the fact that he worked seven days a week.

The EAT concluded that: “Provided he paid the current rent and gave suitable notifications, he could work or not work as he wished with no adverse consequences under the contract. Looking only at the written terms, in my judgment he was not employed under a contract of employment and for that reason his appeal would fail. There was a contract which had mutual terms but one of those terms did not involve an obligation on the Claimant to do any amount of work at all”.

Comment

This case is a reminder that despite recent helpful legal cases on employee status, such cases still very much depend on the facts found by the tribunal. In the current case, both the tribunal and the EAT found that the written contract correctly reflected the true nature of the agreement between the parties – in that he really was able to accept or refuse work as he pleased. The case could easily have gone the other way, if the tribunal had found that the written agreement did not reflect the true nature of the relationship between the parties. Advising with any certainty on these cases remains as difficult as ever.